How to Hook a Life-time Customer

Put yourself in the mind of the customer: give them what they want and don't make them pay for it...right away.

Many businesses define the value of a customer by long-term or lifetime value—a formula calculated by estimating the profits generated by that customer into perpetuity (discounted back to the present). Most customers, however, have a different perspective. They define value as the difference between the highest price they would be willing to pay and the actual price. In economics, this is sometimes referred to as consumer surplus.

The trick is to find a long-term value proposition that works for both you and the customer. Unfortunately, many companies lose sight of the fact that if they don’t provide customer value in the short term, they will never have the opportunity to provide customer value in the long term, because the customer won’t come back.

We were reminded of the importance of customer value in two recent interactions with vendors:

1. We chose a new vendor to build and manage our website. As soon as we informed the account reps of our decision, they began to suggest additional services and advice the company could provide—at no additional cost—which made us feel good about the substantial investment we were making in them.

2. We chose another vendor for some personal photography. The photographer quickly offered us an additional "bonus" product. But when we reconsidered the initial purchase and opted for a slightly lower-cost option, the rep told us we were now $200 under the amount needed to qualify for the "bonus." Feeling slightly misled, we opted for another vendor and ended up spending twice the amount we originally agreed to.

Businesses that do create customer value in the short-term, like our website vendor, for example, will always have the option to choose how to create value in the long term, by rising prices, reducing the cost-to-serve, increasing volume (i.e., selling more), or even choosing not to serve that customer. All of these options can increase profitability.

What’s more, we’ve found that if you "wow" a customer once or twice early on, with a great product or great service, they will purchase from you with more confidence in the future. This, of course, results in less price sensitivity, which can drive higher profits.

It’s a simple concept, but one that management teams frequently overlook. By thinking about customer value from your customers’ perspective—even if it means losing some short-term battles—your customers will reward you in the long term. And if they don’t, you can always walk away.

http://www.inc.com/karl-and-bill/how-to-hook-a-life-time-customer.html

10 steps for dealing with criticism

Takeaway: Criticism can be tough to handle, especially for analytically inclined IT pros. Alan Norton offers some advice for weathering critical remarks.

I have noted during my career that IT engineers often respond negatively to criticism. There are a number of reasons for this. We may be trying to hide our insecurities and lack of knowledge, especially if we’re inexperienced. We may only hear the message as negative. We may fail to engage the wonderful thinking processes we have been gifted with. Or we may just be too lazy to consider constructive criticism. Ironically, put the same IT engineers in a conference room and they have no problem criticizing your systems design. To test your sensitivity to criticism, ask yourself how receptive you were to the critical words of your immediate supervisor during your last performance appraisal.
 
I am not going to tell you that dealing with criticism is easy. On the contrary. Analytical thinkers are convinced that their way is the only way. I have seen it all too often in my own family when a discussion amongst the analytical thinkers soon becomes contentious. But it doesn’t have to be that way. Follow these 10 steps to get a better grip on the unwanted and unsolicited critical words hurled in your direction.

Step 1: Consider the possibility that you might be wrong “Truly it is an evil to be full of faults; but it is a still greater evil to be full of them and to be unwilling to recognize them, since that is to add the further fault of a voluntary illusion.” — Blaise Pascal

Before you can accept and properly deal with criticism, you must admit the fact that there is always room for improvement and that you are not perfect. Only the perfect can disregard all criticism. I may not know you, but I do know that you are not perfect. It follows that you have seen, and will continue to see, your fair share of criticism - so please read on.
Think wrong before you are wrong.

Step 2: Consider the other point of view
“Don’t criticize what you don’t understand, son. You never walked in that man’s shoes.” — Elvis Presley

Through experiences, we gain wisdom. Since it is impossible to experience everything life has to offer, consider each person as a repository of unique experiences and lessons learned just waiting for you to mine. If you do not understand the criticism, consider the possibility that the events experienced by the criticizer may have given him or her wisdom that you do not possess. With the right attitude, your own point of view might be changed for the better.
Regard, but don’t discard.

Step 3: Consider the source
“We hate to have some people give us advice because we know how badly they need it themselves.” –Anonymous

It is human nature to consider most criticism as derogatory. Before jumping to conclusions, though, you should consider who is giving the “advice.” It is easy to misunderstand the nature of the criticizer. Analytical thinkers, for example, are wired to recognize invalid arguments, mistakes, and bad information. It’s what they do, so you shouldn’t be too surprised when they offer you their “helpful advice.”
Pay attention to criticism from your friends and loved-ones. Recognize those who will not be offering constructive criticism before you waste one gigasecond of brain time. Some people, by their very nature, offer unhelpful advice or criticism. It’s wise to recognize that fact and accept that there is little that you can do to change their behavior.
Separate those who indicate from those who pontificate.

Step 4: Listen
“If we were supposed to talk more than we listen, we would have two mouths and one ear.” — Mark Twain

It is also human nature to dismiss criticism and let it go in one ear and out the other. It is so much easier than having to try to understand the “critical” point being made. Listen to or read the comment containing the criticism carefully. I often have to reread a paragraph before understanding the point trying to be conveyed. “Listen” with more than your ears. Important information can be derived from the tone of the words and the body language of the criticizer. And it’s much harder with oral communication. You need to listen and respond quickly by thinking on your feet, and you can do that only when you give the speaker your full and undivided attention.
Listen also to your gut. It will tell you when criticism has touched a raw nerve.

Step 5: Don’t respond emotionally
“Against criticism a man can neither protest nor defend himself; he must act in spite of it, and then it will gradually yield to him.” — Johann Wolfgang von Goethe

Regardless of whether the criticism is valid, a defensive attitude is unprofessional and irresponsible. You may not like the “helpful advice” that has been handed to you. We all too often want to respond to criticism with a knee-jerk defensive attitude or with a verbal attack of the criticizer. Lashing out with an angry emotional response like, “You are a clueless buffoon” may help you feel better, but it’s unwise — especially if said to your boss. Defensive, angry emotional responses are almost always regretted later when the heat of the moment has passed. After all, professionals who are secure in their abilities let their work do the talking for them.
There is a reason why your parents told you to count to 10 before responding. The time allows us to engage the brain and respond thoughtfully instead of emotionally. Thomas Jefferson once said, “When angry, count ten before you speak; if very angry, a hundred.”
Reflect, but don’t deflect.

Step 6: Throw out derogatory criticism
“If I care to listen to every criticism, let alone act on them, then this shop may as well be closed for all other businesses. I have learned to do my best, and if the end result is good then I do not care for any criticism, but if the end result is not good, then even the praise of ten angels would not make the difference.” — Abraham Lincoln

There are two basic types of criticism, constructive and derogatory. Before you can respond correctly to criticism, you must separate criticism with merit from criticism of no value. Only the obviously malicious statements should go into the “derogatory” bucket in this step.
Criticism from these behavioral types can almost always be put into the “derogatory” bucket:

• Armchair Archie — Second guesses after the event
• Back Seat Bertie — Not responsible but offers “helpful” tips anyway
• Bamboozle Bambi — Snows them with a blizzard of meaningless words
• Complicated Cuthbert — Offers solutions that are more complex than a Rube Goldberg machine
• Conformist Concetta — Critical of eccentric behavior outside the “norm”
• Hopeless Harry — The eternal pessimist
• Obvious Olivia — Points out the obvious
• Omniscient Oscar — The know-it-all who tells you wonderful, irrelevant facts
• Pernicious Percival — Intentionally tries to do harm with criticism
• Repetitious Repete — Repeats criticism already expressed, typically in a forum
• Silly Sally- - Offers ridiculous solutions
• Wrong Way Willie — Always points you in the wrong direction

Distinguish the character from a character.

Step 7: Recognize constructive criticism
“Every human being is entitled to courtesy and consideration. Constructive criticism is not only to be expected but sought.” — Margaret Chase Smith

It is not as easy to recognize constructive critical statements about you or your work as you may think. Communication is complex, and your sensitivities and prejudices work against the proper deciphering of the message.
Six types of messages can be messages of constructive criticism (Table A).

Table A

Types of constructive criticism.

As you can see, the intended message can be very different from the message received. Constructive criticism is or is not in the eye of the beholder. If you do not recognize constructive criticism for what it is, you will most likely discard it.

Step 8: Acknowledge and accept the truth
“Every truth passes through three stages before it is recognized. In the first it is ridiculed, in the second it is opposed, in the third it is regarded as self evident.” — Arthur Schopenhauer

You may properly recognize constructive criticism, but without acknowledging and accepting the truth in the message, you will almost certainly ignore it. Sometimes the truth hurts, but that does not necessarily make it invective.
Concede the painful truth before the truth becomes painful.

Step 9: Act on constructive criticism
“Criticism always follows worthwhile action. The opposite is seldom true.” — Torley Wong

If you follow the above steps but do not act, you have wasted an opportunity — and you might be on a collision course with disaster. You may need to swallow your pride and change your plans. Yes, it is true; even the best of us are wrong at times, and it takes mature people comfortable in their own skin to admit when they are wrong.
Act but don’t react.

Step 10: Learn from criticism
“Don’t mind criticism. If it is untrue, disregard it; if unfair, keep from irritation; if it is ignorant, smile; if it is justified it is not criticism, learn from it.” — Anonymous

We can all learn from criticism, even when it is not well intentioned. You may not be able to use constructive criticism to change work that has already been completed but you can certainly use it in the future. The next time a similar situation arises you can avoid the behavior that spawned the original criticism.
Learning from criticism is better than learning from failure.

The bottom line

“Criticism may not be agreeable, but it is necessary. It fulfills the same function as pain in the human body. It calls attention to an unhealthy state of things.” — Winston Churchill
Since IT is full of analytical thinkers, it’s important to learn how to best dish out and respond to criticism. Make sure your unsolicited words are helpful before engaging the language center of the brain and consider carefully, before speaking, how the message will be received. Ambiguous or unclear criticism will almost never be received well.
Failure to respond correctly to constructive criticism can be costly. Engineers of all types should note that failure occurs all too often at the most important step, step 1. All steps are important, but when engineers and managers fail to consider the possibility that their intended course of action might be wrong, the remaining nine steps become moot. From the Titanic to the Space Shuttles Challenger and Columbia, warnings have been given, and ignored, leading to loss of life. Software engineering errors also cost lives and are estimated to cost $60 billion annually in the U.S. alone.
Responding to criticism in a professional manner will reduce the possibility of any hurt feelings among you and your peers. Criticism may be a bitter pill to swallow, but necessary for growth beyond one’s own preconception of self. A world without criticism might be more comfortable, but it would also be less fulfilling and a lot more dangerous.

http://www.techrepublic.com/blog/10things/10-steps-for-dealing-with-criticism/2834

Don't Let Your Customers Bully You

If you're a pushover, you'll completely lose a customer's respect. Follow these six steps to diffusing customer anger without caving in.

My recent column Top 5 Ways Big Customers Screw With Small Vendors points out that some buyers see sellers—that means you—as scapegoats. Buyers use the fact they needn't work with you on a daily basis as an excuse to vent their frustration by exploding at you

Sometimes such customer-explosions are be triggered by something that you, or your company, did that wasn't to the buyer's liking. And sometimes the abuse seems to simply comes out of nowhere. Regardless, what's important isn't where it comes from, but rather how you deal with it.

Unfortunately, many sellers deal with this kind of behavior in exactly the wrong way. They sit there and take it, then meekly apologize.

That's the absolute worst thing you can do.

The moment you let a customer bully you, you've completely lost that customer's respect. Worse, you've set yourself up for a relationship of further bullying and abuse.

Here's a simple six-step recipe for defusing this situation.

• STEP #1: Keep your pipeline full. Bullies smell fear. The best way to be fearless, when you're selling, is never to rely entirely on a single customer to make your revenue numbers. If you know you've got plenty of buyers in waiting, you always have the option of simply walking out and moving on.
• STEP #2: Raise your own intensity level. When the customer begins to explode, you've got to get onto the same level in order to create rapport. You don't have to yell, but your voice must be firm and authoritative. If the conversation is face-to-face, you have to keep it eye-to-eye. Wear a serious expression that communicates clearly that you don't appreciate being yelled at and don't intend to be intimidated.
• STEP #3: Call the customer's bluff. You're a professional, not a doormat. State clearly that you're willing to help resolve the problem, but you're not going to be yelled at. Don't mince words. Demand respect. Make it absolutely clear that your help is dependent upon the customer's ability to behave in a civil manner.
• STEP #4: If the customer does not comply, end the conversation. Do this politely but firmly. State that you'll be glad to help once the customer is willing to treat you with the respect that you deserve. Make sure the customer knows how to contact you. Then leave. Never take abuse. No job is worth it.
• STEP #5: Apologize appropriately for the problem. Once you've demanded and received civil behavior—then and only then—apologize for the inconvenience that the problem might have caused the customer. Make a commitment to resolve the problem.
• STEP #6: Work on the problem. Now that you've established that you're not the customer's punching bag, go ahead and work the customer's issue. Needless to say, you'll need to do a superlative job resolving the problem. But you were going to do that anyway, right?

Just this weekend, I came across a perfect example of how to counter bullying in Steve Jobs's biography. Jobs was probably one of the worst bullies in the corporate world, often reducing people to tears. However, when Jobs yelled at his chief designer, the chief designer reacted very differently than did most people. He yelled right back.

Guess who kept Jobs's respect?

Along the same lines, I once worked for a bully who'd pick out a staff member at every meeting to yell at and berate. The one staff member who wasn't treated this way was a woman who, when he tried it on her the first time, threw a pencil at him and told him to "stop acting like an a------."

In short, when you placate, you're just proving to the bully that you're weak and stupid. The bully figures that if you had something valuable to offer, you wouldn't take the guff.

By contrast, when you lay down the law and demand the respect due a professional, you're creating the credibility that the bully needs to see before he begins to trust that you can do the job.

http://www.inc.com/geoffrey-james/defuse-exploding-customers-without-being-bullied.html

5 Ways to Keep Your Biggest Customer

Before you slash prices, check out these strategies for keeping your best customers happy and loyal.

Contrary to popular belief, a big customer that buys a lot of product from you is not necessarily a good thing. Big companies have a habit of pigeonholing smaller firms into being suppliers of commodity products.

That way, they can play you off against your competition in order to push prices down. They don't care whether you make any money on the deal because they can just switch to another vendor should the price drop drive you out of the business.

The good news? There are five ways to defend yourself against this kind of pricing game.

Strategy #1: Differentiate Yourself. If your firm offers a needed product or service that no other company can provide, then it’s impossible for the big company to play you off against your competitors. To create that differentiation, you position your offering so that whatever is unique about it becomes a "must have" for that customer. I once lost a sale of a million-dollar publishing system because the competitor convinced the customer that they needed the ability to set type around the shape of a handprint, something that the customer had never done before and would never do in the future.

Strategy #2: Provide Expertise. If you or your firm can offer expertise that the customer needs in order to fulfill their goals, you can be strategic to them, even if you’re a commodity supplier. For example, a company that sells glue for manufacturing consumer electronics might have world-class expertise in volume manufacturing that, if shared with their customer, would make them more profitable. That expertise is then periodically "lent" to the customer in order to reduce their manufacturing costs, thereby making an ongoing relationship valuable to the customer.

Strategy #3: Create a High Replacement Cost. If it would cost the customer a prohibitive amount to replace your firm's products and services, they're far less likely to replace you with another competitor. What's important here is that you create the high replacement cost AFTER you've made the sale, because prior to the sale, the big customer (if they're at all self-aware) are likely to see the replacement cost as liability and thus be less likely to buy from you in the first place.

Strategy #4: Really Know the Account. If you can get yourself involved in the inner workings of the customer account and become part of their strategic planning, they'll begin to see you as a consultant rather than a mere supplier. For example, IBM sometimes assigns an employee as a general IT consultant inside Fortune 100 firms. In addition to being a sales representative, that employee is mandated to act as an independent IT resource acts as a clearing house for any problems that occur with IBM's offerings.

Strategy #5: Generate Reverse Credibility. This one is tricky, because credibility usually flows from the larger company to the smaller one. (e.g. "Our customer list includes GM and Oracle!") However, if a smaller firm has a market reputation that helps the larger firm create credibility in a new market, the larger firm will may see the relationship as strategic. Example: the Taiwanese computer manufacturer Acer used to publicly tout its' relationship with boutique studio FrogDesign in order to seem more "cool" in the consumer PC space.

http://www.inc.com/geoffrey-james/5-ways-to-keep-your-biggest-customer.html